The 5 Biggest Mistakes in Business

Running a product line is like conducting a symphony. You have to be able to coordinate a lot of different pieces and make them all fit together smoothly.

When you get it right, your business sounds like sweet music. But get it wrong and the results are a noisy mess…

In that spirit, I want to share with you the 5 biggest mistakes I made when starting my first handbag company… along with some simple ways to avoid them.

My Start

When I first started out with my handbag company I was in the dark about pretty much everything, and it seemed that I was the only one who didn’t know it.

I believed I could rely on my intuition and creativity, but I lacked the experience to tell me whether or not my instincts were even remotely correct. As a result, I was flying blind.

The only thing I actually did know was that I was making a ton of mistakes. And these mistakes were costing me tens of thousands of dollars… not to mention more than a few sleepless nights 🙁

I soon learned that having a successful product line requires more than being a great designer.

Here are the 5 biggest mistakes that transformed me from a struggling designer to a successful Entreprenette!

Know Your Margins

What’s the one thing every business needs to survive?

Money.

And money comes from margins – knowing how to properly cost and price your products through every stage of production and distribution.

When I first started out, I had no idea how to determine my costs. And because of it, my margins were so thin that products that should have been selling at a generous profit were, instead, losing money.

My business was on life support – and I barely had enough cash to keep the doors open.

When I finally learned the right formula, my margins immediately increased by 250%. My profits increased overnight, and I finally had the money to pay sales reps, hire employees and grow the business.

The simple formula to increasing your margins

Calculating margins is actually very simple. Here’s how to do it:

The first thing you want to do is calculate your cost of good sold – or COGS. This does not include marketing, overhead, rent, or salary……nothing else but the three steps below.

List out all the raw materials that you use for each item you make.

Add in the cost of any freight costs for getting the raw materials to your production facility.

Add in the labor charge for the item.

Total these up and you’ve got your actual COGS price.

How to build in profit:

a. In order to make a profit (and not give it away like I was), follow this simple formula. It will leave with you enough revenue to cover your overhead and generate a healthy profit on top.

b. COGS x 2.5 (3.0 for jewelry) = wholesale x 2.3 = retail

Own Your Trademark

It’s been said that a name is everything. My second mistake was not taking care of mine.

When I started my first handbag company, I trademarked the name, “Sarah Shaw Handbags”. Unfortunately, instead of registering the trademark personally, I did so under my corporation. Therefore, the corporation owned the TM, not me.

When things went south later on, I closed the company and decided to keep the trademark… it was my own name after all. Or so I thought. Turns out that I didn’t legally own it.

Because the TM was owned by the corporation and not by me, my investors threatened to sue me over the use of the name “Sarah Shaw Handbags”. And as a result of this HUGE mistake, I no longer have the legal right to use my own name!

How to learn from my mistake

This one’s easy:

Maintain your TM under your name, not your corporate name.

This will ensure you have control over your IP if your company ever closes, changes hands or if you take on partners or investors.

You can license the use of the trademark to your corporation to use for $1/year.

Perfect Your Sales Pitch

Pop quiz: do you know what the most valuable skill any Entreprenette can have?

Answer: Selling.

Because if you can’t get people to buy your fabulous products, then making money will be… well… impossible.

And this brings me to my third deadly sin… not knowing how to sell.

When I started my business, I literally had NO idea how to sell. My tactic was to shoot from the hip and cold call buyers I had found in magazines. (The Internet was just getting its legs back then.)

While I had no shortage of courage, I lacked a clear and concise sales pitch. I didn’t know how to guide the sale – and I certainly didn’t know how to close.

Instead, I was hesitant, unprepared and unprofessional. And it showed. Buyers didn’t take me seriously, and my sales really were terrible.

How to Learn From My Mistake

Understand that every effective sales pitch must be short and to the point. Buyers don’t have time to waste, so you not only must be compelling, but you’ve also got to do it quickly.

As with anything else, practice makes perfect. Before you pick up that phone, perfect your pitch with a friend. Then when that moment arrives to do it for real, you’ll be ready to seal the deal.

Create Your Marketing Strategy

Someone once told me that you are nothing without the right marketing strategy. Without it, no one will know who you are.

Unfortunately for me, when I started my first line, not only wasn’t I doing any marketing… I didn’t even know I should be doing it.

Buyers wouldn’t respond to my cold calls, because they didn’t understand what I was offering and why it was a benefit to their customers. I was spending a ton of time working the phones with almost nothing to show for it.

I finally decided that it was time to get a marketing strategy.

At the time, my design studio was in the downtown Los Angeles garment district. So I strolled into the designer showrooms in the California Mart, figuring that someone – or something – would show me the way.

As it turns out, this was a pretty good idea. I left with bags full of sample postcards, line-sheets and other advertising collateral that much more experienced designers used as marketing materials. How genius! I finally knew how the professionals did it…

How to learn from my mistake

Create a line sheet or catalog for buyers to look through. Make sure to include style numbers, wholesale prices, descriptions of your products and professional photos (no iPhone shots…).

Know your target audience – and then market the stores they shop at.

Focus your marketing materials on the needs and desires of your target audience. Your buyers are in the business of selling to these people, and they’re looking for products that will do it.

And once you have these steps down, marketing yourself will seem effortless

Trust Your Gut

Market research is important… it’s always smart to know the current trends, what your market is buying and who your target customers are.

But there’s something to be said for good, old-fashioned creativity and intuition.

And this was my fifth mistake: not trusting my vision.

When I started my first line, I knew exactly what I wanted to design and how I wanted to manufacture it. As my handbags began to sell and demand increased, I knew that if I just trusted my gut, I would be successful.

But success brought the peanut gallery… And it wasn’t long before sales reps, business partners and investors were all offering their 2 cents about what I should or shouldn’t be designing.

Since I was fairly new to the business, I caved in to their advice and ended up knocking off some trending styles.

What. A. Disaster.

The new line didn’t sell, and I was emotionally crushed.

But it was a worthwhile lesson, because in that moment, I learned to trust myself – and to never design anything that either didn’t feel right or didn’t fit my aesthetic.

Customers buy from you because of your design esthetic!

How to Learn From My Mistake

Simple. Trust your gut. While running a product line requires many skills that are fairly cut and dry, sometimes you just have to go with what feels right to you.